TRI Pointe Homes, the West Coast builder controlled by Barry S. Sternlicht’s Starwood Capital, is merging with the home-building subsidiary of Weyerhaeuser, a large owner of timberlands, in a deal valued at $2.7 billion.
The merger will create one of the 10 biggest home builders in the country, a combined company that will own or control some 27,000 lots in fast-growing markets, the companies said on Monday.
The deal will employ a transaction structure known as a “reverse Morris trust†that enables the merger to be tax free. Weyerhaeuser will spin off or split off its real estate subsidiary, with the shares going to Weyerhaeuser shareholders. That new company will merge with a subsidiary of Tri Pointe, with Weyerhaeuser shareholders owning 80.5 percent of the combined company on a fully diluted basis.
Those shareholders will receive 130 million shares of Tri Pointe, or $2 billion based on Tri Pointe’s closing stock price of $15.38 on Friday. The Weyerhaeuser real estate subsidiary will also make a $700 million cash payment to Weyerhaeuser.
Mr. Sternlicht will continue as chairman of the board of Tri Pointe, and Doug Bauer will continue to serve as chief executive of the company. Tri Pointe, based in Irvine, Calif., was the first home builder to go public since the housing crisis, making its market debut in January 2013 at $17 a share.
Weyerhaeuser will select four directors for the Board, while Tri Pointe will select five.
Deutsche Bank and the law firm Gibson, Dunn & Crutcher advised Tri Pointe. Citigroup and Morgan Stanley are serving as financial advisers to Weyerhaeuser, and Cravath, Swaine & Moore is its legal adviser.
